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‘NMI govt must pay $51M a year to keep Fund afloat’
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Posted on Apr 26 2008
The central government must pay $51.62 million a year to the NMI Retirement Fund to ensure the defined benefit plan stays afloat, according to the Fund’s actuarial consultant.
The actuary-recommended employer contribution is 37.39 percent of the government’s annual payroll, a slight increase from the current rate of 36.77 percent.
The annual contribution also represents nearly one third of the revenue the government expects to collect this fiscal year.
Dylan Porter, director and consulting actuary at Buck Consultants, made a presentation on the 2006 actuarial valuation to the CNMI Legislature on Friday. Retirees were in the audience.
Porter reported that as of Oct. 1, 2006, the Retirement Fund has an accrued liability of $987.15 million. But the Fund only has assets amounting to $472.7 million. This results in an unfunded liability of $514.46 million.
In order to achieve full funding of the defined benefit plan by the recently adjusted 2045 deadline, the government must contribute yearly amortization of $38.17 million, plus $10.35 million in normal payroll contribution, $1.24 million in interest on unpaid contributions, and $1.5 million for administration expenses.
“If the government make these payments, the Retirement Fund should remain healthy,” said Porter.
The reality, however, is that the central government has not paid any contributions to the Fund since 2006. And the lack of money coming into the pension program is forcing administrators to liquidate assets to pay biweekly benefits.
This year alone, the Fund will withdraw $45 million to pay retirees and annuitants. If the drawdowns continue at the current rate, Fund assets will go under in less than 10 years.
Juan T. Guerrero, chairman of the Fund board of trustees, said the drawdowns not only eat away at the assets, they also limit the Fund’s ability to make strategic investments and expand the capital.
Not surprisingly, retirees are worried. “This is horrible, frightening,” said Sapuro Rayphand, who retired in 2005 after working for the CNMI government for 23 years. Rayphand now relies on his pension for income.
